Plaid was accused of stealing customers’ login information and impersonating banks to get people’s financial information in 2019. A judge in a lawsuit let Plaid’s privacy claims proceed, ordering payment to all affected customers from 11 plaintiffs in five cases led by James Cottle.
How It All Started?
A Venmo user, James Cottle, said he didn’t realize he was giving Plaid his banking information when he signed up in 2019. In a 2019 federal lawsuit, he claimed Plaid hid its access to his sensitive financial information by asking him to set up a Venmo account. This tricky process hides the fact that Plaid intercepts and sells consumer spending data.
Cottle’s case was filed in combination with other lawsuits in May, June, and July 2020. Plaid was accused of invasion of privacy, unjust enrichment, deceit, and breaking California’s Anti-Phishing law, which makes it illegal to lie to get financial information. It alleged a Stored Communications Act violation. This law prohibits unauthorized access to “electronic storage” and Digital trespassing. Other plaintiffs said that Plaid’s login screens resembled bank screens, but Plaid didn’t tell users they weren’t talking to their bank.
In April 2021, a U.S. Magistrate ruled that a group of customers had enough evidence that Plaid had broken California privacy laws by hiding its role as a transactional middleman to secretly download their financial data. The plaintiffs, including Cottle, didn’t say Plaid’s actions hurt or cost them money or property. Their fraud claims were dismissed under California’s Unfair Competition Law and Computer Fraud and Abuse Act. These claims were thrown out without prejudice, meaning they couldn’t be resubmitted.
What Was The Deal Breaker?
Plaid filed a class action lawsuit as they planned to sell their company to Visa for $3.5 billion. They sued to stop Visa’s purchase of a fintech startup, saying it would give Visa the power to raise prices, hinder competition, and slow innovation. The Department of Justice looked into the deal to see if it would hurt online debit service competition. The two companies abandoned the deal.
The Verdict And the Settlement
Plaid has agreed to pay $58 million to settle a class-action privacy lawsuit. The settlement requires that Plaid delete a lot of customer data it stole and sold. Plaid didn’t admit wrongdoing in the settlement but agreed to specific rules about handling customer information.
What Are The New Changes Expected?
Plaid is changing its business in response to this order. The company will delete transaction data for users who didn’t link a bank account or for whom it can’t verify their identity. Going forward, Plaid will collect and store as little data as possible. The company will inform account holders of these changes and update its privacy policy. It has also created a portal for managing app access to financial accounts. This will give people complete information about their financial statements, such as a “plain-language list” of the information, why it’s collected, where it’s coming from, how it’s used, and who it’s shared with.
Moving Forward
Plaid is looking to settle its lawsuit with the Consumer Financial Protection Bureau. This would end the legal proceedings and could set a precedent for how fintech companies, banks, and aggregators interact with customers using their financial data.
Globaltradeleaders.com reports on the business activities and the performance of trade finance leaders. Visit Global Trade Leaders website to learn about global finance leaders.
